The United States controls the export and reexport of sensitive military and dual-use equipment and technology (dual-use items have applications in both the military and civilian sectors) using complex regulatory and licensing regimes. Many other industrialized countries do likewise. For example, the U.S. controls the export and reexport of munitions items under the International Trafficking in Arms Regulations (ITAR) and the export and reexport of dual-use items under the Export Administration Regulations. Both regulatory schemes permit exports and reexports only in accordance with tightly defined licenses or license exceptions. Such licenses and license exceptions impose legal duties on all parties involved in the transaction and often draw careful lines between permissible and prohibited conduct with respect to particular foreign destinations for exported items, as well as with respect to specific parties who may receive the items and the uses to which parties may put the items.
Effective compliance with these regulations requires the U.S. exporter and, in some instances, the foreign recipients of U.S.-origin goods and technology, to communicate very specific information to one another in a manner that is accurate, timely, and confidential. These parties also need to be alerted when one party fails to provide required information to the others. The U.S. exporter normally would be the holder of the export license; under both sets of regulations, the exporter/license holder bears primary responsibility for insuring compliance by the other parties to the transaction. Violation of either set of regulations can result in the imposition of civil and criminal fines, imprisonment of individuals, and denial of future export privileges—or all of the above. Actions by foreign parties who receive, reexport, sell, or use U.S.-origin goods and technology can result in similar penalties being imposed against them as well as, in certain circumstances, against the U.S. exporter.
Currently U.S. exporters and foreign recipients of U.S.-origin items must communicate with each other about their compliance with U.S. export controls on an ad hoc basis by a variety of means, including email, facsimile, and hard copy letters. Such communications present the following problems for the management of export control compliance: they are not organized according to a shared set of logical principles; they do not always accurately and completely answer each others' questions; they are not submitted in a timely manner; and they are not stored in a common, centralized system of records for future retrieval and auditing. Consequently, these communications may result in one or more parties to the transaction committing violations of the Export Administration Regulations (“EAR”) (15 CFR Chapter VII, Subchapter C) or the International Traffic in Arms Regulations (“ITAR”) (22 CFR Parts 120 through 130). The Export License Compliance System that is the subject of this patent application is designed to solve these problems.
Moreover, there is no U.S. regulatory requirement that exporters must adopt a means of complying with the export control laws. Indeed, an exporter can legally refrain from using any management techniques; if lucky, the exporter will not commit a violation of the regulations. Most companies, however, use *some sort of management control to ensure compliance. Yet the compliance schemes vary widely, due to differences in the technologies exported and the geographic markets served. Probably the most widely recognized and influential study of export compliance is the “Nunn-Wolfowitz Task Force Report: Industry “Best Practices” Regarding Export Compliance Programs,” which was published Jul. 25, 2000 (“Nunn-Wolfowitz Report”). This “blue ribbon” task force was commissioned by the Board of Directors of Hughes Electronics Corporation to make recommendations concerning any changes in Hughes' operations and procedures that may be necessary or desirable to ensure that the corporation has in place a “best practices” standard for complying with the letter and spirit of U.S. export control law and regulations. A copy of the Nunn-Wolfowitz Report is attached. This Report also can be found at: www.kslaw.com/library/pdf7nuriiiwolfowitz.pdf).
A review of the Nunn-Wolfowitz Report shows that this comprehensive and thoughtful analysis, which was prepared by a prestigious group of experts, issues than the subject matter of the Export License Compliance System as set forth herein. They offer services designed to help exporters screen potential customers to detect parties whose export privileges have been denied or restricted by the U.S. Government; classify items to be exported to determine whether they fall within technical parameters that indicate an export license would be required; and prepare documents required to effect shipments and to submit reports to the U.S. Government for statistical and regulatory purposes. But none of these companies offer the particular service of ensuring compliance with the terms and conditions of export licenses that could be obtained using the subject of this patent application.
For example, the company Vastera, Inc., which is probably the largest and best known company in the marketplace for export compliance managed services, states on its website Cwww.vastera.com), that it offers the following services in the area of export compliance: classification, screening, document preparation, drafting procedures and instructions, government reporting requirements, compliance training, and audit and internal reviews. In the category of “document preparation”, Vastera emphasizes the preparation of the bills of lading, and other shipping documents. In the category of “government reporting requirements”, Vastera emphasizes the preparation of the Shippers Export Declaration or its equivalent document in the Automated Export System, both of which are required by law to be submitted to the U.S. Government in connection with exports. However, unlike the present invention, Vastera does not offer a particular electronic service that is designed specifically for managing compliance with particular export licenses.
Another managed services company in the marketplace is Open Harbor, Inc., which states on its website Cwww.openharbor.com), that it offers services such as: restricted party screening, embargo screening, C-TPAT participant screening, security questionnaire, shipment security audit, workflow management, product compliance screening, license determination, product catalog, classification tools, landed costs, and global trade documents. However, unlike the present invention, Open Harbor does not offer a particular electronic service that is designed specifically for managing compliance with particular export licenses.
Companies such as Vastera and Open Harbor provide general purpose services designed to assist companies in complying with the EAR and ITAR with respect to a broad range of export transactions. The scope of compliance services offered by these companies includes export transactions that do not require a license under the EAR or ITAR, as well as transactions that do require export licenses under those regulatory systems. These compliance services also are intended to be used at all stages of business transactions, ranging from screening initial inquiries received from potential purchases, through pro form a quotations of prices, to completion of shipping documentation. However, unlike the present invention, these companies do not provide discrete electronic systems designed to manage compliance with the terms and conditions of specific export licenses that have been issued by the Government prior to export.